Retirement

6 Basic Retirement Rules

As a Christian, you are called by God to serve. This calling does not end when you stop receiving a paycheck.  Retirement is not only a reward for past service but a stepping-stone to future ministry. We call this your Future Funded Ministry! When you successfully construct and fund a retirement plan, you are creating a source of money to fund your future ministry activities. What an exciting way to live!

The following Retirement Rules will equip you with basic strategies to help you achieve your Future Funded Ministry plan!
 

Rule 1:  Save at least 10% of your income towards your Future Funded Ministry plan

This provides a simple target for you to work towards as part of a disciplined savings approach. You may start at a lower level and then focus on increasing your contributions over time to get to this percentage.

Rule 2:  Plan on living 20-25 years in retirement after age 65

People who live to age 65 have a 50% chance of living to age 85 and a 25% chance of living until 92.

Rule 3:  Plan on needing 70% to 80% of your income in your Future Funded Ministry years

Certain expenses will likely disappear or be reduced once you leave the workplace.

Rule 4:  To make your savings last, withdraw less than 4% a year

This simple formula has proven very accurate over time. It provides a guideline for how much to withdraw each year without exhausting your Future-Funded Ministry savings.

Rule 5:  Rebalance your asset allocation at least once per year

Rebalancing is when you adjust your portfolio back to an appropriate asset allocation mix. This keeps your investments aligned with your risk tolerance and goals.

Rule 6:  Bonds percentage of your portfolio equals your age

This rule is a reminder that your portfolio needs to change as you age, becoming gradually more focused on avoiding risk and providing income.

5 factors that may affect your retirement

Inflation

  • Reduces how much you can buy today, compared to last year
  • Historically, inflation averages 3% annually
  • Your investments need to keep pace with or outpace inflation

Investment Risk

  • Determine how much potential gain you are aiming to achieve with your investments, understanding that also means you may potentially lose a similar amount
  • More risk equals more volatility in returns and account values go up and down more
  • Diversify your portfolio by allocating money to multiple asset classes so you are not totally exposed if one asset type (such as stocks) drops dramatically

Healthcare and long-term care expenses

  • A number of studies show that the average 65-year-old couple can expect can expect to spend hundreds of thousands of dollars on healthcare in retirement
  • The combination of increasing life expectancy and growing medical treatment costs can have a huge negative impact on savings
  • Consider obtaining Long Term Care insurance
  • The premiums can be significant, but having the coverage in place may help avoid disrupting your overall retirement planning strategy

Taxes

  • Employer-sponsored and individual pre-tax accounts offer a variety of ways to receive tax breaks when making your retirement savings contributions
  • Pre-tax contributions provide a current reduction in taxable income, and therefore a reduction in the taxes you pay each year as you are adding to your accounts
  • Roth contributions are done on an after-tax basis, which does not provide a current year tax advantage but does allow you to make withdrawals on a tax-free basis in retirement

You

  • Set goals for what your financial needs will be in retirement
  • Evaluate your personal risk profile and asset allocation strategy
  • Take full advantage of any employer matching contributions you may be eligible for
  • Roll over assets from former employer plans rather than cashing out those accounts
  • Seek out trusted professional guidance or use available self-help tools